Home Equity , Mortgages

How Much Does It Cost To Build A Prefab Home

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 16 minute read

Don’t be put off by the word prefab home; in fact, the modern prefabs (called building systems by the National Association of Home Builders) are very wonderful. In addition to providing buyers with a bespoke, energy-efficient building solution, they are often cheaper than conventionally constructed houses. 

In general, you may expect to pay between $100 and $220 per square foot for a prefab home, and this price range frequently includes the home’s interior fittings and amenities though this is not always the case.

How Do Prefab Homes Work?

Prefab houses are residences that are built in a factory, then transported to the site in sections for rapid on-site construction. 

Prefab homes, in contrast to manufactured or mobile homes, must be built in accordance with state or municipal building rules as opposed to the federal building code maintained by the U.S. Department of Housing and Urban Development (HUD).

This makes them a widely-accepted form of new construction, as they are not typically subject to the same zoning limitations that limit the placement of manufactured and mobile homes. 

To rephrase, prefab homes must adhere to the same building regulations as sticks and bricks construction, allowing them to be constructed in the same geographic areas.

You also won’t need to have the full amount for the home’s cost on hand, as prefab homes are often eligible for construction and home loans, just like traditionally built homes. 

In addition, many companies that make prefab houses are willing to work with you to secure financing or even provide it themselves so that you can begin building your home.

Size and Design of Prefabricated Homes

The size of a prefab house can be whatever the buyer desires. Quite small modular constructions exist, such as those modeled by New Frontier Design. 

The Breezehouse by Blu Homes is one example of a spacious, multi-thousand-square-foot alternative, as it can accommodate as many as five bedrooms, five bathrooms, and approximately 3,000 square feet of living area.

Modular homes’ rising popularity might be attributed in part to their natural compatibility with the current trend toward smaller dwellings. While it’s true that putting up a house of any size is going to cost money, people who are concerned with keeping their utility bills down might choose a small, prefab modular home instead of a site-built one.

There are no design constraints when it comes to constructing a prefab house. Perhaps it will come down to selecting a specific prefab home design to suit your taste.

  • Most modular homes have a sleek, modern, boxy appearance because their modules are produced in squares or rectangles and stacked or positioned on site according to the building blueprints. However, the boxy form of certain modular constructions can be altered by adding panelized walls or roofing.
  • Panelized homes provide for greater customization than stick-built houses, allowing homeowners to design their dream homes exactly how they see them. The modular nature of the houses means that they can be assembled on-site to suit a wide range of architectural preferences.
  • Prefab houses. especially dome houses and log cabin kits, tend to adhere to a certain design aesthetic. The aesthetics of the kit you select will determine which ones you get. In reality, you can pick and choose from a vast range of styles.

Manufacturers are beginning to mix and match prefabrication techniques to increase design flexibility. As an illustration, Westchester Modular Homes employs prefabricated rectangular modules for the home’s rooms and framework but then modifies the look of the house by adding panelized walls and roof trusses.

Household Package Features

If you’re thinking about buying a prefab house, it’s crucial that you know exactly what comes with your chosen package. Precut and panelized homes, on the other hand, typically just include the materials needed for a wall, roof, or frame, whereas modular homes typically do not always come with a full package of fixtures, appliances, windows, and flooring.

Insulation, electrical wiring, windows, doors, and drywall may or may not be present in the walls and roofs in question. Sometimes you can pay extra to get the walls already up, but more often than not you’ll need an on-site contractor to assist you to put the finishing touches on your home’s roof and walls.

Take Stillwater Homes as an example of the kind of amenities you might anticipate finding in a home. Since they provide both modular and panelized prefab choices, they are a valuable resource for shoppers.

1. Modular Dwelling

An investor in a Stillwater modular structure might get:

  • Architectural components, the building’s blueprints, and design
  • Structural engineering, to ensure the structural integrity of your home
  • State or local building permit
  • Floor structure (not including foundation)
  • Roofing
  • Lighting fixtures
  • Plumbing fixtures
  • Windows
  • Siding
  • Cabinets and trim
  • Flooring
  • Countertops
  • Appliances
  • Smart home automation system, to remotely manage electricity use, lighting, and security systems
  • Installation of home on prepared foundation

Although there are some customization and upgrading choices, they are restricted. You pick one of three available finish packages appliances and fixtures and the company takes care of the rest to get the desired look.

It’s true that some other modular home builders, like Blu Homes, provide a wider selection of finishing packages, giving you more control over the final look of your home, but these options are still restricted in comparison to what you can buy on your own. 

If the company doesn’t sell Wolf appliances as part of a bundle, you won’t be able to pick one at random. It’s either a package deal or you pick the appliances yourself from what the company has available.

2. Panelized Prefab

Fewer extras are included in Stillwater’s panelized prefab homes and those by other panelized home builders as well. Panelized construction is the way to go if you want a say in the home’s final look by selecting your own appliances and fixtures. 

On the other hand, modular construction is the way to go if you’re in a hurry and you only want to pick from a pre-approved set of plans.

Stillwater Dwellings provides the following with every panelized home they construct:

  • All major framing components (walls and roof)
  • Architecture – the blueprints and design
  • Structural engineering – ensuring the panels and their placement on your foundation are structurally sound
  • State building permit

What is Usually Excluded

Be wary of the phrase all included when it comes to purchasing a modular home, as it might be deceptive. You should know that many of the costs associated with building a home are not included in the base price of a prefab home.

You should be ready to pay for any unforeseen costs, such as:

  • The land the house will be built on
  • Soil testing
  • Site survey
  • Utility hookups, if necessary — water, wastewater or septic, electrical, cable
  • The prepared foundation for the home to be built on — concrete slab or pier and beam framing
  • Landscaping
  • Driveways and sidewalks
  • Garage or carport, though these may be available from some manufacturers
  • A local contractor or builder to finish the interior of a panelized or precut home

There is a huge range in these costs because they depend on factors like location, property size, and even municipal requirements or individual taste. In the case of a rural construction project, for instance, extensive landscaping may not be necessary or desired. 

Landscaping may be obligatory if you’re constructing in the city or in a community with stringent HOA rules.

Permits, fees, foundation, and utility hookups could easily add up to tens of thousands of dollars. Having to install a septic system and well on land that isn’t connected to municipal water and sewage services will increase the price of the property.

It’s important to ask a lot of questions before making a final decision on a home or manufacturer so you understand what’s included and what you’ll have to take care of on your own. 

To make sure you’re comparing like manufacturers, it’s a good idea to acquire detailed information on the products and services offered by each.

Some constructors, for instance, may provide a more comprehensive service that covers things like soil testing, foundation excavation, and site preparation. It would be a shame to rule out a turnkey solution because of its higher sticker price when the difference in total costs may be insignificant.

Upgrades and Options

It is vital to note that in addition to the standard modular house finishes included in a preselected home build, you may have a selection of upgrades to pick from at an additional cost. 

For instance, while pieceHomes only provides one finish package, you can change out some features—like the flooring—for more expensive options like bamboo.

There are other modular home producers who provide more leeway in terms of aesthetic and functional customization. Look at Blu Homes’ configurator to get a sense of the customization possibilities available to you. 

You may find a house that fits your budget and aesthetic preferences in terms of size, layout, and exterior materials, and then customize it further by choosing a floor plan and making changes to things like the paint, flooring, cabinetry, and appliance packages, among other things.

Blu Homes has many more options than piece home, but it still falls short of the flexibility you’d have when working with a designer or purchasing online for the appropriate finishing touches.

It’s important to keep in mind that many of the extras and perks will cost you more money. If money is short, choose upgrades wisely.

Price

The lower construction costs of prefab houses are a major selling factor for these dwellings, which are becoming increasingly popular as an alternative to traditional stick-built houses. 

The typical cost of a completed home, according to Modular Homeowners, is estimated at $110 per square foot, excluding the cost of land (including taxes or fees), the setup of utilities, and outside touches (driveways, landscaping, and porches).

Many modular home companies, however, charge closer to $220 per square foot because of their high-end fixtures and fittings. 

So, excluding the cost of land, site charges, and taxes, you may anticipate spending between $27,500 and $55,000 to construct a 250-square-foot home and between $275,000 and $550,000 to construct a 2,500-square-foot home.

One or more of the following factors contribute to the lower overall cost of a prefab home as compared to a site-built home:

  • Reduced trash. Overwhelming amounts of extra materials are generated when multiple teams of contractors ship goods to a place and construct a home on the spot. Panelized or modular home construction allows for more efficiency and less waste than site-built dwellings.
  • Time and effort saved. Subcontractors such as plumbers, electricians, painters, and framers typically show up at a construction site independently from one another to carry out their specific tasks during a conventional build. Sometimes, the efforts of other contractors slow down or impede this activity. Modules and panels constructed in a manufacturing setting benefit from the streamlined time and labor management.

One more advantage of purchasing a modular prefab home is the convenience of a one-stop shop. Modular home builders can save money by purchasing materials in bulk and passing those savings on to the customer, even if not all of the finishes are inexpensive. You’ll also avoid the hassle and extra work of having to personally select all of your appliances and fittings.

Modular Homeowners estimate that you can cut the cost of your new home by 10% to 20% by using this method instead of traditional site-built construction.

However, because of the long building time and the continued need to employ a contractor to finish the home once it is erected on-site, it is projected that the savings will be less for a panelized home.

Constructing a Prefab House

Learning the technical definitions of a prefab home is one thing, but actually constructing one is another story entirely. The good news is that it’s essentially the same process as building a conventional house, only quicker.

Purchasing the Right Land Before You Begin

The improper land purchase might add thousands of dollars to your final cost or possibly derail your plans entirely, despite the fact that prefab construction is generally acknowledged as a superior method of home-building. 

Before purchasing a residential area, think about the following:

1. Local or city building regulations

Make sure you can construct a prefab house, and more particularly the kind of prefab house you intend to construct, by thoroughly researching local and regional building codes. 

Some communities, for instance, have strict guidelines about the kind of builders allowed on the property and the architectural style of the homes that can be constructed there. A neighborhood full of ranch-style homes might not be the best place for your geodesic dome.

2. Simple Access

Keep in mind that delivery of modules, panels, or a kit will require a large truck to access your property. When building a modular home, a crane is utilized to set the structure in place over the base. 

You may be in for a nasty shock when it comes to site preparation expenditures if the only way to access your home’s plot is by small, winding roads or if your building site is tucked away behind a forest.

To get the construction vehicles to our building site, my husband and I had to pay an extra $3,000. to have the cedar trees removed. That’s three grand that I could have put to better use. You can save a lot of money in the long run if you can discover a great piece of land that is close to a road.

3. Sample of Soil

The present owner may allow you to conduct exploratory digging and/or a soil survey before you buy the site. The price of creating a solid foundation for your home might vary widely depending on the type of soil on which it sits. 

The cost of your home’s foundation can soar if, for instance, you choose to construct your home on clay soil or on top of a large rock. Fine clay sediment swells in moist conditions and compresses in dry ones.

This irregular “settling” can cause the drywall to fracture, windows, and doors to shift, and utility connections to become loose. Building a house on clay requires extra precautions, such as compacting the soil before laying the foundation and possibly installing support beams to keep the house from sinking if the earth shifts.

However, if your site is composed of too much rock, it can be quite costly to drill through in order to lay a level foundation. One of the reasons our septic system installation cost $13,000 was that it took a drilling company three full days to bore through the rock where our septic system was constructed.

There is no definitive “best” soil for construction, but it is important to have an idea of the soil conditions on any given piece of property you’re considering purchasing.

4. Utilities

If you plan on using utilities like water, gas, and electricity, you should contact your local municipality or county to find out where the nearest hookups are to the location you have in mind for your construction project. 

There is probably going to be a fee associated with establishing connections to these networks. The alternative is to drill a well or put in a septic system, both of which can be costly if you don’t live inside a city’s zoning boundaries. 

Knowing what needs to be done and how much money will be needed to make your home completely functional is crucial.

How to Finance and Pick a Home

Getting approved for a mortgage and deciding on a house go hand in hand. It’s complicated since determining your budget is necessary before selecting a home builder or plot of land, but finalizing your loan is impossible before entering into a contract with a home builder.

Financing a prefab home is, fortunately, not drastically different from financing a traditional house. A traditional mortgage loan is still an option.

When discussing mortgage options with financial institutions, be sure to include not only the price of the property and the house but also the expenditures associated with preparing the land and completing the construction.

Remember that the down payment for a custom home will be higher than that for a similar prefab one. To build a house, you will likely need to pay a down payment of at least 20%.

If you want to get a loan, do what I say.

1. Get Pre-approval

Your income level and credit score will determine whether a bank will prequalify you for a construction-to-permanent mortgage loan. To assist you in selecting the finest loan, it is a good idea to obtain at least three loan estimates. 

Credible* makes this possible in a matter of minutes. These loans often have rates that are a little bit higher than regular 30-year mortgage rates.

2. Identify Your Land

This is the time to choose a construction site if you haven’t already. It’s possible that getting building financing will require you to buy the land first. In this scenario, you should consult your bank to figure out what to do. Loans for both the land and the housing development can be necessary.

There are ways to finance a land purchase, but they often come with higher interest rates and mandate a larger initial investment. If you haven’t already done so, but have an intent to sell document from the landowner specifying the price of the land, you may be allowed to include the cost of the land purchase in your construction financing.

3. Select a producer

Selecting a manufacturer comes after settling on a plot of land. Look for producers who have a track record of success, an extensive portfolio, and creative concepts that suit your tastes. 

Before making a decision, it’s important to have in-depth conversations with your top manufacturers of choice. Any expenses that aren’t covered by the original estimate must be listed individually.

4. Choose a general builder

If the prefab house company you’re working with doesn’t provide referrals to local general contractors, you’ll need to do it on your own. For the “buttoning up” of the build after delivery, you’ll want to hire someone who has experience with prefab homes and who knows how to prepare a building site.

The primary responsibility of your general contractor is to ensure that all phases of building, positioning, and finishing your home are carried out properly and in accordance with applicable building codes. 

Since you will be spending so much time together at work, it’s in your best interest to carefully consider each prospect. Make sure you have a general contractor’s quote in hand after hiring one so you can submit it with your loan application.

4. Complete Your Loan.

Take your land contract or a letter of intent to sell from the buyer and your contracts with the general contractor and prefab home builder to your bank of choice. If your home builder is unwilling to sign a contract before you have a loan, you may be able to show the bank you intend to close by using a draft contract instead.

You’ll need to show the bank proof of your income and assets, as well as your employment status, tax returns, references, and credit report. You should be able to get a comprehensive list of everything the bank needs from you.

6. Arrange a Payment Plan

To arrange a payment plan, you must engage with the manufacturer, the contractor, and the bank. The bank often won’t grant the requested funds until it has examined the property to confirm that the predetermined work was finished.

7. Complete the Loan and Construct the House

Getting started on the building is possible after the loan closes. Since you’re building from the ground up, you should know that most financial institutions are willing to provide a construction loan that converts to a permanent mortgage once the house has passed its final inspection. 

It is common practice to pay solely the interest on a construction loan during the duration of the project. After refinancing into a permanent mortgage, you’ll be required to make regular principal and interest payments according to the loan’s original terms.

Keep in mind that a 20% down payment on the overall construction loan which may or may not include the cost of your property is often required if your loan is structured as a construction loan as it likely will be if you are buying land. 

Since construction is a higher-risk endeavor for financial institutions, they are less likely to give the same low down payment choices that are available with conventional mortgages.

Timeline

A prefab house may be constructed in a few short days or weeks, but that has nothing to do with how quickly the actual construction takes place. According to Modular Homeowners, the entire process, from planning to move-in, can be completed in about four months if you’re prepared and organized. 

However, most manufacturers of modular and panelized homes recommend allocating at least two to three months for the fabrication of the home, so it is safe to assume that the full procedure could take anywhere from four to six months.

Permit to finish time for a single-family home is seven months nationally, and eight months for residences built on the property of the owner, citing the Census Bureau’s 2022 Survey of Construction. Depending on the specifics of your design, opting for a prefab home could save you up to four months of time.

Building a prefab dwelling typically entails three distinct steps:

1. Planning

In terms of duration, the planning stage is actually the most unpredictable. This is because it can take some time to locate an appropriate building site, acquire the necessary permits, finalize the design of your home, conduct interviews with prospective general contractors, and finally, close on your mortgage.

Assume at least a month to finish this stage. Don’t forget that many prefab builders will do some of this work for you, especially when it comes to acquiring the necessary building permits. It’s possible to do some of these things at once if you’ve previously settled on a prefabrication company.

2. Production and site preparation

Generally speaking, you should expect the production and site preparation to take around the same amount of time regardless of which manufacturer you go with. 

Many modular manufacturers, including Hive Modular, recommend a lengthier time frame, often two to three months, than what Modular Homeowners recommend (6 weeks for the build and prep).

Think about how your general contractor’s timeline impacts this transitional phase as well. Your timeline could be pushed back even if your prefab home is ready to go if the contractor is delayed in completing site prep due to inclement weather or difficulties coordinating with subcontractors.

3. Construction

Your house will finally arrive and be set up at this point. But don’t assume you’ve made it to the end just because you feel like you have. The shipping and assembly of a modular home may only take a few days, but there is still some cleanup and buttoning up of the site that must be done afterward.

It needs to be watertight, for example, so that rain doesn’t get in between the modules. Both the home’s utilities and the grid’s utilities must be connected. There is a necessity to secure the internal walls. Furthermore, there is the matter of inspections.

More work is required to get a panelized or precut house suitable for occupancy. It is imperative that all the inside fittings be installed and that the finishing touches being applied. Before you can move in, this phase will take at least six weeks.

Bottom Line

When compared to the time and money required to construct a home the traditional way, a prefab structure is a clear winner.

Take charge of the building of your home by doing your homework and consulting with the many suppliers you’re thinking about using. Building a home, prefab or otherwise, is not for those who would rather kick back and let someone else do all the legwork.

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